Financing artistic ventures: the investors behind creative sectors
Revved-Up Rebel: The Unstoppable Creative Economy
In the upcoming decades, two powerhouses are set to dominate the global scene — tech and creative industries. It's all about reinventing and redefining what makes a product uniquely captivating, with countless industries at play: video games, software, advertising, marketing, design, film, fashion, music, theater, architecture, folk crafts, museums, jewelry art, and more.
The beating heart of any creative product is a one-of-a-kind, money-making idea. Creative industries can be a goldmine for investors, helping them boost their core business. Investing in quality architecture, city planning, and cultural programming can significantly influence product development and sales. A compelling cultural product can spark interest in a project even before its inception, or powerfully shape its image. The key is timing; to capture opportunities, you gotta strike while the iron's hot.
Historically, creative industries have faced financial isolation and secrecy, with a narrow focus on targeted investments. For decades, insiders were the only ones who could successfully invest in creative fields like film, fashion, or contemporary art.
The Unpredictable Wild West
The business world still views creative industries with skepticism, viewing them as unreliable options for capital investment. The United Kingdom, for instance, discovered that in 2023, 85% of investment deals in the creative sphere were linked to IT companies and digital products.
The creative economy thrives on innovation, blending modern technologies with traditional creative industries to create an attractive investment landscape. The remaining creative sectors account for just 15% of all investments. This is in a country where intellectual property enjoys strong legal protection.
So why such hesitation among investors? According to the study's authors, it's a "lack of knowledge" in the field. The second most significant hurdle? "Uncertainty in investment potential." Traditional valuation methods don't always apply in the creative world, with project profitability hinging on factors like ever-changing audience preferences, trends, talent, cutthroat competition, and more.
Global Government Push
Over the last decade, governments worldwide have been working to foster growth in creative industries. Programs like those in the USA, UK, Germany, Japan, South Korea, and many others aim to cultivate fully developed companies with clear, sustainable business models. These initiatives also strive to build relationships between creative industries and potential investors.
In Russia, the Agency for Strategic Initiatives (ASI) acts as the ringleader, coordinating the country's policy towards creative industries. ASI helps regions establish their Creative Industry Development Standards, focusing resources on the industries with the most potential. By zeroing in on specific sectors, they work to refine support methods, build crucial infrastructure, and stimulate the creation of value across different industries.
Under ASI's auspices, an international Producers' Club operates, bringing together representatives of creative industries, investors, and potential clients. Regional Producers' Clubs are popping up, alongside active Regional Expert Groups, tirelessly working to provide participants with access to support measures, educational programs, and industry events. One of the critical factors in boosting the creative sector? Investment.
The Creative Economy Development Center of ASI also conducts industry research, promotes Russian creative products internationally, and supports the promotion of creative projects. They organize various acceleration programs for creative projects, help with national and international promotion, and provide consulting and methodological support. Their goal? To create a platform that allows many creative industries to thrive, since many can't be subject to sanctions.
In short, ASI has been fostering creative entrepreneurs, making their projects more investor-friendly for several years now. This support is finally starting to bear fruit.
Venture Funds Bet on Creativity
When it comes to creative industries, venture companies, and funds with a taste for high-risk investments are the biggest players. Russia is no exception.
The masses crave creativity. Creative industries offer opportunities for massive international deals. For example, Saudi Arabia signed a master franchise agreement with the gaming network True Gamers, forking over $45 million to open 150 esports clubs in the country.
Local Russian venture investors are also in on the action. Skolkovo Foundation supports startups working in the fields of technology, design, and media, including FashionFactorySchool, Canvas, Monroe Art Service, and more.
Serious players in the investment market for creative industries have moved on from folkloric artistic crafts to projects significant to the country's history, embodying time-honored values and symbols.
Large corporations drive growth in creative industries by supporting artistic initiatives and collaborating with artistic collectives. This helps build brand recognition and improve a company's perceived value in the market.
For example, AFK "Systema" runs projects like "Lift to the Future," "Culture and Enlightenment," "Social Environment," while Rosatom offers a corporate program "Territory of Culture of Rosatom," and Gazprom sponsors festivals like "Torch," "Siberian Odyssey," "Music Without Borders," and an international art festival in China.
Private investment in creative industries is on the rise, with famous "Krestetskaya Strochka" factory in Novgorod becoming self-sustaining under the ownership of private investor Anton Georgiev. New development models for NHP are emerging, with entrepreneurs beginning to profit from the tourist infrastructure around these cultural gems.
ASI continues to provide support for creative entrepreneurs, helping them navigate the harsher realities of the economy. Their initiatives, like the "Antifragility" creative laboratory in Syssert and the "Fedoskino" factory, aim to make creative products more appealing to investors and ultimately boost profitability.
"Big Tech" is also in the game, systematically purchasing groundbreaking startups to maintain their competitive edge in the future. Creative projects can offer fascinating solutions for large ecosystems, generating intriguing opportunities for collaboration.
Large corporations, like Yandex, have successfully integrated services like KinoPoisk, PriceLabs, and FoodFox to create new market niches and foster a culture of investment in creative industries. They've also established their own corporate venture funds to monitor emerging projects more efficiently.
State support focuses on grants (e.g., the Presidential Fund for Cultural Initiatives), but these platforms often serve as mere stepping-stones for projects, with over 50% of grant recipients finding no further business development, according to the Agency for Strategic Initiatives.
To bridge this gap, the agency also backs crowdfunding platforms like Planeta.ru, which support projects in various creative industries, such as rock musicals, mystical detective films, and archaeological museum restoration. Investors can contribute any amount or choose a "reward" for their support.
Advanced crowdfunding platforms offer real investment opportunities, complete with comprehensive project analyses, investment portfolios, and profit generation. The Central Bank oversees nearly 100 crowdfunding organizations in Russia, with the likes of JetLend, "Potok," and Lender Invest leading the pack.
The Russian crowdfunding market grew by 59% in 2024 to 53 billion rubles, with a considerable chunk of the funds going to creative industries. The creative sector's impact on the economy continues to grow, contributing 7.5 trillion rubles or 4.1% to the Russian GDP in 2024. The government aims to raise this contribution to 6% by 2030, driving significant change in the sector.
Creative industries contribute to the growth of other sectors, primarily because they generate additional value and impact the overall profitability of a business. By fostering the development of creative cities and regions, they bring forth new jobs, improve local infrastructure, enhance the image, and attract tourists. With a focus on grants, funding, infrastructure development, and education, governments and investors alike can build an inviting ecosystem that fosters sustainable growth and profitability in the creative industries.
- The creative economy, driven by a blend of modern technology and traditional creative industries, presents an attractive investment landscape in the upcoming decades.
- Despite the potential for high returns, the creative industries face skepticism from the business world, with uncertain investment potential and a lack of knowledge being the major hurdles.
- Government initiatives, such as the Agency for Strategic Initiatives in Russia, aim to educate investors, build relationships between creative industries and potential investors, and stimulate the creation of value across different sectors.
- Venture funds and private investors are increasingly betting on creative industries, with potential for massive international deals like the $45 million master franchise agreement between Saudi Arabia and gaming network True Gamers.
- The Russian crowdfunding market, growing at 59% in 2024, plays a crucial role in financing creative projects, contributing significantly to the Russian GDP and driving growth in other sectors.
